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3 Stocks Near 52-Week Highs Worth Selling: Toll Brothers Inc (TOL), Sun Communities Inc. (SUI)

Even with the house of cards tumbling down on the housing sector yesterday, and the threat of the central bank purchasing fewer Treasuries and mortgage bonds, well over 200 companies still notched a new 52-week high. For skeptics like me, that’s an opportunity to see whether companies have earned their current valuations.

Keep in mind that some companies deserve their current valuations. Network equipment provider Cisco Systems, Inc. (NASDAQ:CSCO), for instance, dazzled Wall Street with another quarterly earnings beat last week. Cisco, even with the weakness of Europe weighing on its future, projected sales growth of 7% to 8% in 2013 as it continues to transition to cloud-based hardware.

Still, other companies might deserve a kick in the pants. Here’s a look at three companies that could be worth selling.

Sun Communities Inc (NYSE:SUI)The sun is setting on this company
I’m not quite sure how crazy you have to be to bet against a real estate investment trust in the red-hot housing sector, but apparently I’m there! Sun Communities, Inc. (NYSE:SUI) is an owner of manufactured housing communities primarily in the Midwest, South, and Southeastern U.S. As a REIT, it’s required to pay out at least 90% of its profits as a dividend to shareholders. Between the economic rebound and Sun’s 5.5% yield, shareholders have enjoyed a nice ride since the bottom. Furthermore, Sun’s funds from operations forecast for 2013 of $3.45 to $3.55 per share was ahead of the $3.38 consensus.

Yet I feel there are plenty of reasons to jump ship right here. The biggest concern I have with owning a manufactured housing REIT would be that low rates would either tempt prospective homebuyers into purchasing a house or keep them in their apartments and saving up for a home. Manufactured homes are sort of in a middle ground until lending rates begin to rise, which, I feel, will crimp Sun’s growth opportunities from an organic basis in the interim.

Also, even with its impressive cash flow, Sun’s $1.23 billion in net debt would cause me to sleep poorly at night. Sun’s business model, at least at the moment, necessitates it continue to make acquisitions in order to spur FFO growth. Unfortunately, these acquisitions are only going to further drive up its debt levels. With Sun at roughly 13 times projected FFO, shareholders are left with very little room for error.

If you’ve got an issue, stay away from this tissue
The paper business is far from exciting, but sometimes the least exciting businesses make for the best long-term investments. However, tissue, paperboard, and pulp producer Clearwater Paper Corp (NYSE:CLW) is not on that list — at least for me!

Clearwater Paper reported its fourth-quarter earnings last night and, while surpassing EPS estimates by $0.08, it fell short on revenue estimates by $5.4 million. Cost synergies from its purchase of Cellu Tissue helped reduce its total expenses, yet overall net selling prices of its non-retail tissue, as well as its paperboard and pulp, fell from the previous year.

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